June 02, 2020

How Big Is The 2020 Stock Market Crash? Let’s Find Out

Written by: HUDSONPOINT Team
Market Update, Stock Market

Hudsonpoint - Real estate income investmentsOn February 12th, 2020, the stock market reached all-time highs then crashed. The Dow Jones Industrial (DJI) sat at a lofty 29,551.42 by market close. Analysts were convinced we were about to break 30,000 for the first time in history, extending the already-historic 11-year bull run.


Just two weeks later, the sky began to fall. From February 24th to the 28th, world markets suffered their greatest declines since 2008. After a short bull rally, the markets crashed again on March 5th. For the next two and a half weeks, they kept falling.


The Volatility Index (VIX), also known as the ‘Fear Indicator’, surged past its 2008 highs all the way to 82.69 by close of trading on March 16th. Then, on March 23rd, the DJI fell all the way down to 18,200 before closing around 18,591.93, a 37% drop from the February 12th peak. It was the fastest 30%+ decline in history.


As of April 3rd, the DJI is resting at 21,052.53, still 29% below the peak during a second bull rally that is beginning to fade.


How will the 2020 market crash compare to previous crashes? It’s hard to say right now. Events are still unfolding. We’re not sure when the coronavirus pandemic will peak. Although the scientific community seems to agree that we’re still 12–18 months out from a viable vaccine.


That being said, we can certainly compare what’s already happened so far in 2020 with the biggest crashes in US history. Let’s see how our current market crash compares.


How do previous stock market crashes compare to 2020?

Over the past 100 years, there have been multiple market corrections (defined as a 10% drop from the peak) as well as multiple bear markets (defined as a 20% drop from the peak).


In fact, there have been 34 bear markets from 1900–2014. Using the S&P 500 as a benchmark, there have only been 9 major stock market crashes in that same timeframe where the markets fell by more than 25%:

  • The Great Depression (September 1929–June 1932): The markets dropped by 86.1% over the course of 34 months. Even worse, it took 29 years for the markets to revisit the highs of 1929.
  • Post-WWII (May 1946–June 1949): An ‘inventory recession’ occurred after World War 2 ended and the wartime boom faded. The markets dropped by 29.6% over 37 months and the recovery took nearly 5 years.
  • Cuban Missile Crisis (December 1961–June 1962): Fears of an impending World War III slashed 28% from the markets, and multiple crashes followed in the coming years. The S&P 500 didn’t revisit the highs of 1966 for another 24 years.
  • Nixon and Vietnam (November 1968– May 1970): America’s growing involvement in Vietnam led to a bear market soon after Nixon won. The markets fell by 36.1%.
  • Yom Kippur War and Watergate (January 1973–October 1974): A Middle East oil embargo combined with Watergate to depress the US economy by 48%.
  • Stagflation (November 1980–August 1982): Reagan beat Carter in part because of stagflation that had been holding growth hostage. Markets fell by 27.8%.
  • Black Monday (August-December 1987): The biggest one-day decline on record saw the markets fall by 22.6%. They bottomed 33.5% and revisited highs nearly 2 years later.
  • Dot-Com Crash (March 2000– October 2002): Pets.com enjoyed an $82.5 million IPO one month before the Internet bubble finally burst. The markets fell by 49.1% and didn’t revisit the highs of 2000 again for 14 years.
  • The Great Recession (October 2007–March 2009): When the housing bubble burst, we were faced with a 56.4% drop and global recession. The markets recovered to the highs of 2007 nearly 5 years later.
  • COVID-19 Market Crash (February 2020): So far, the coronavirus-driven crash has resulted in a recent bottom of 37% from the peak. When will it end? No one knows.


Compared to the previous nine bear markets that saw the S&P 500 fall by more than 25%, the 2020 market crash (37%) is in 5th place. Only the Yom Kippur crash (48%), the Dot Com crash (49.1%), the Great Recession (56.4%), and the Great Depression (86.1%) were worse.


Does that mean our current crash isn’t that bad? Not necessarily. Even if we don’t fall more than 37% from the peak, keep in mind that the market crash from 1980–1982 (36.1%) still lasted for 21 months. On the other hand, the Black Monday crash (33.5%) was over in just 3 months.


In volatile, uncertain times like these, how do you make the right decisions for your portfolio? The good news is that there are several strategies you can choose, from hedging with volatility ETNs or exploring alternative assets that could provide uncorrelated market performance.


HUDSONPOINT Capital has been advising clients for 20 years on how to best access alternative investment vehicles that complement their investing goals and long-term vision. If you want to discuss how to best rebalance your current portfolio, we’re more than happy to help.


LEARN MORE  HudsonPoint Learning Center


The performance quoted herein represents past performance. Past performance does not guarantee future results. Investors cannot invest directly in an Index and performance represents gross returns without net fees if any.

This is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation of any products or services. Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice. Please note that any investment involves risk including loss of principal.

Securities offered through National Securities Corporation Member FINRA/SIPC

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